Asian Markets Exhibit Divergence Following Wall Street's Tech-Driven Decline
Asian shares presented a mixed picture on Wednesday, reacting to a sharp downturn on Wall Street that was primarily fuelled by substantial losses in the technology sector. Concurrently, precious metals like gold and silver continued their upward trajectory, reclaiming ground after a recent sell-off as investors gravitated towards safer assets amidst ongoing geopolitical concerns and economic uncertainties.
Regional Market Performance Across Asia
In Japan, the Nikkei 225 index declined by 0.6% to settle at 54,391.58. Despite this dip, the index remained higher compared to its position at the beginning of the week. Notable movements included a 2% fall for chipmaker Tokyo Electron and a 1.6% loss for testing equipment manufacturer Advantest. In contrast, SoftBank Group managed a marginal gain of 0.2%.
Nintendo experienced a dramatic plunge of over 10%, despite the company reporting robust profits on Tuesday. This sell-off reflected investor and analyst apprehensions regarding the sustainability of sales momentum for the Switch 2 game console, which was launched last year.
South Korea's Kospi index bucked the regional trend, rising by 0.8% to 5,331.02. This gain occurred even as some technology-related stocks showed weakness, with Samsung Electronics dropping 0.2% and chipmaker SK Hynix falling 1.4%.
Hong Kong's Hang Seng index decreased by 0.8% to 26,629.81, while mainland China's Shanghai Composite index remained virtually unchanged at 4,067.39. Australia's S&P/ASX 200 traded 0.7% higher at 8,917.40, and Taiwan's Taiex index saw a modest increase of 0.2%.
Precious Metals Rally as Safe-Haven Demand Intensifies
Gold and silver prices recorded significant gains on Wednesday, continuing their recovery from a recent sell-off. This movement was driven by investors seeking refuge in safe-haven assets due to heightened geopolitical tensions, a weaker U.S. dollar, and uncertainties surrounding global trade tariffs.
Gold's price surged by 2.8% to $5,070.30 per ounce, while silver jumped by an impressive 4.8% to $87.29 an ounce. This rally follows a notable correction earlier in the week, where gold had fallen to below $4,500 on Monday from nearly $5,600 the previous week, and silver had plummeted more than 31% on Friday.
Analysts at ING Bank, Warren Patterson and Ewa Manthey, noted in a research note: "After plunging from record highs amid elevated volatility, precious metals attracted renewed buying interest." They added that for gold, the recent correction does not indicate a shift in the underlying macroeconomic narrative, with safe-haven demand expected to support prices over the medium term.
Wall Street's Tech Sell-Off Sets the Tone
The negative sentiment in Asia stemmed from Tuesday's performance on U.S. stock markets, which experienced broad declines led by major technology stocks. The S&P 500 index dropped 0.8% to 6,917.81, the Dow Jones Industrial Average fell 0.3% to 49,240.99, and the Nasdaq composite declined by 1.4% to 23,255.19.
Key technology giants faced substantial losses: Nvidia fell 2.8%, and Microsoft dropped 2.9%. This sell-off was partly attributed to investors rotating out of technology stocks amid concerns over potential overvaluation and doubts about the profitability of heavy investments in artificial intelligence.
PayPal sank 20.3% following weaker-than-expected quarterly results, while Pfizer dipped 3.3% despite reporting stronger-than-anticipated profits.
Broader Financial Market Movements
In the bond market, the yield on the U.S. 10-year Treasury note decreased to 4.27% on Wednesday from 4.29% late Monday. This drop in yield, which occurs when bond prices rise, indicated stronger investor appetite for safer government debt.
Oil prices also firmed in early Wednesday trading. U.S. benchmark crude oil gained 0.6% to $63.60 per barrel, and Brent crude, the international standard, rose 0.5% to $67.66 per barrel. Analysts at ING Bank suggested that rising tensions between the U.S. and Iran contributed to this strength, following an incident where a U.S. Navy fighter jet shot down an Iranian drone near a U.S. aircraft carrier.
In currency markets, the U.S. dollar strengthened against the Japanese yen, rising to 156.25 yen from 155.72 yen. The euro edged higher against the dollar, trading at $1.1824 compared to $1.1819 previously.
